2011 U.S. Dist. LEXIS 29407
D. Md.2011Background
- Debtor Robert F. Rood IV filed a voluntary Chapter 7 petition on May 29, 2008; he controlled multiple entities including Blue Horseshoe Portfolio Services, Level One Capital Partners, and The Source.
- The bankruptcy court administratively consolidated the Debtor Entities with Debtor’s case on December 29, 2008.
- Appellants Rosen (Chapter 7 Trustee) and SMCRT filed an adversary proceeding on April 1, 2009 seeking injunctive relief, turnover, and damages alleging a Ponzi scheme and asserting fraud, conversion, civil conspiracy, unauthorized post-petition transfers, and fraudulent conveyance against the Debtor and related entities.
- The bankruptcy court held a series of hearings in 2009, including a preliminary injunction proceeding concluding with a memorandum decision that highlighted mismanagement of funds and poor record keeping by the Debtor Entities.
- On February 5, 2010, Appellees Kore Holdings, Inc. and related entities moved for summary judgment on the six remaining counts; Appellants cross-moved for summary judgment arguing lack of fair consideration and urging alter ego/veil-piercing theories.
- The bankruptcy court granted Appellees’ motion for summary judgment on the six counts at issue, and the court’s oral ruling acknowledged the alter ego arguments, while not definitively resolving them; the order was entered March 12, 2010, and the case was appealed to the district court.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the bankruptcy court properly granted summary judgment on the fraudulent conveyance counts | Rosen argues lack of fair consideration and that alter ego/veil-piercing should defeat transfers | Rood contends transfers were made in satisfaction of antecedent debts and/or through alter egos; judicial estoppel precludes disputing alter ego | Reversed in part: improper to grant summary judgment on fraudulent conveyance due to unresolved veil-piercing/judicial-estoppel issues |
| Whether the bankruptcy court properly granted summary judgment on the conversion claim against Mr. Rood | Conversion claim should not be defeated by alter ego theories; evidence supports liability | No cognizable property remained subject to conversion; Cadillac transferred and surrendered | Affirmed: conversion claim against Mr. Rood upheld; no genuine issue on this count |
| Whether the denial of Appellants’ cross-motion for summary judgment should be affirmed | Cross-motion for summary judgment should be granted on alter ego/fraudulent-conveyance theory | Alter ego/veil-piercing record insufficient and judicial estoppel applies; cross-motion should fail | Dismissed: denial of cross-motion not a final, appealable order; Rule 7054/54(b) context; appeal from denial dismissed |
Key Cases Cited
- Hildreth v. Tidewater Equipment Co., Inc., 378 Md. 724 (Md. 2003) (alter ego/veil piercing requires extraordinary showing; three criteria and factors)
- Bart Arconti & Sons v. Ames-Ennis, 275 Md. 295 (Md. 1975) (circumstances for disregarding corporate entity; alter ego context)
- New Hampshire v. Maine, 532 U.S. 742 (U.S. 2001) (judicial estoppel elements and bad-faith conduct considerations)
- Whitten v. Fred's, Inc., 601 F.3d 231 (4th Cir. 2010) (elements for applying judicial estoppel in the Fourth Circuit)
- Turner v. Turner, 147 Md.App. 350 (Md.App. 2002) (burden on proponent of veil piercing and standard of proof)